THE GOVERNMENT will have to cut health spending over the next two months to fulfil a new commitment it has given under the terms of the EU-ECB-IMF bailout.
At the conclusion yesterday of the seventh review of the Government’s compliance with the bailout programme, the troika, representing the three international lenders, said programme implementation “remained strong in a challenging environment”, but it sounded notes of caution about Ireland’s unemployment rate, its budget deficit remaining the largest in the EU and about the weakening external environment.
It also identified the emerging Health Service Executive spending overrun as a problem.
As part of its structural reforms, the Government must specify measures to rectify the overspend by the end of September. In practice, it will mean that the HSE will have to identify efficiencies and cuts.
Official figures to be published today will confirm that the HSE showed a deficit of €281.6 million to the end of May.
Minister for Public Expenditure Brendan Howlin said the matter had been discussed with troika officials during talks, but he said the importance of this issue should not be over-exaggerated as the deficity comprised only 2 per cent of the HSE’s €13.4 billion budget.
Mr Howlin and Minister for Finance Michael Noonan, in a joint press conference, described the latest review as a success, and said Ireland continued to meet all the targets set by the European Commission, the European Central Bank and the IMF.
Mr Noonan said there had been discussions on the commitments on bank debt sustainability agreed at the EU summit last month. Technical talks with the troika would continue during the summer and concrete proposals would be made to the eurogroup in September, with a view to a final decision in October.
Mr Noonan emphasised several times the importance of lowering the burden of debt from its peak of between 117 and 118 per cent of GDP, and said it would revolve around substantial reductions in the bank debt burden.
Repayments of interest on loans advanced to cover bank losses would result in a drag on growth rates, he added, before comparing it to “driving a car with the handbrake still on”.
“What we want is a public announcement in October that there’s an agreement about measures to make the Irish debt position more sustainable,” he said.
The troika did not hold a media conference, but issued a statement in which it pointed to strong implementation of the programme and signs of increasing confidence in Ireland, reflected in falling bond yields.
While praising the Government’s consistent record of reaching targets, the troika also noted that Ireland’s budget deficit remained the largest in the euro area and its unemployment rate remained very high.
Mr Howlin said the most daunting task the Government had was reducing the number of long-term unemployed.
Fianna Fáil finance spokesman Michael McGrath said there would now be considerable pressure on Minister for Health James Reilly to bring spending back on target. He also expressed concern about the lack of measures to address unemployment.
